Investors pin hopes on strong jobs report

After sliding in January, stocks roared back in February. Click the chart for more market data.

Following a slump in January, stocks bounced back sharply last month, with the S&P 500 ending February at an all-time closing high.

But whether the record streak continues in March will largely depend on the economic data on tap this week.

Recent reports about the job and housing markets, the retail sector and manufacturing have pointed to weakness this winter. Although some of the softness is probably the fault of bad weather, it's unclear how much is really due to snow and ice. So there are concerns that the economy may indeed be weakening.

This week's data dump includes reports on personal income and spending, manufacturing activity and construction. But the highlight of the week comes on Friday: the February jobs report.

The past two jobs reports have been disappointing, showing signs of a slowdown in hiring. And February may not be much better.

Paul Ashworth, chief U.S. economist for Capital Economics, thinks the economy added 125,000 jobs last month. That's a small improvement from December and January. But it's still lackluster.

If hiring remains sluggish for reasons beyond the cold weather, it could impact the Federal Reserve's plans. The central bank is currently in the process of winding down, or tapering, its bond-buying program. Fed officials have said they expect to continue scaling back purchases by about $10 billion a month at each meeting.

While Fed chair Janet Yellen doesn't seem to think any changes are warranted yet, she has also said the Fed would be open to reconsidering its course of action if there is a significant change in the economic outlook.

Why you're not feeling record stocks

As much as investors have embraced the Fed's stimulus during the past five years, more quantitative easing due to a slowing economy would not be good news.

In other economics news, the Fed will release its closely-watched Beige Book report, a compilation of data on regional economies.

The situation in Ukraine, which grew more tense over the weekend, will be eyed warily by traders around the world this week, too.

Europe's central bank will also be in the spotlight. Last month, the European Central Bank kept interest rates on hold.

But pressure has been building for the bank to take action to stimulate economic activity amid signs that inflation is slowing in the eurozone, raising the threat of deflation.

During its meeting, the ECB will be updating its economic growth forecasts through 2016. If the ECB believes that inflation will remain weak into 2016, the new projections could be the trigger for a change in policy, said Ken Wattret, chief euro-area economist at BNP Paribas.

While the economy and stock market could show some volatility in the near-term, experts still remain fairly optimistic about 2014 as a whole.

Few are expecting a repeat of 2013, when the S&P 500 surged 30%. But most are forecasting modest gains as the economy continues to recover and earnings growth remains solid.

To that end, companies in the S&P 500 have reported profit growth of 8.5% for the fourth quarter, according to FactSet Research. For 2014, analysts are predicting earnings growth of 9%.

Most companies have already reported their latest earnings but three well-known retailers are due to release their results on Thursday: Costco(COST), Kroger(KR) and Staples(SPLS).